Correlation Between Loctek Ergonomic and Montage Technology

Can any of the company-specific risk be diversified away by investing in both Loctek Ergonomic and Montage Technology at the same time? Although using a correlation coefficient on its own may not help to predict future stock returns, this module helps to understand the diversifiable risk of combining Loctek Ergonomic and Montage Technology into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Loctek Ergonomic Technology and Montage Technology Co, you can compare the effects of market volatilities on Loctek Ergonomic and Montage Technology and check how they will diversify away market risk if combined in the same portfolio for a given time horizon. You can also utilize pair trading strategies of matching a long position in Loctek Ergonomic with a short position of Montage Technology. Check out your portfolio center. Please also check ongoing floating volatility patterns of Loctek Ergonomic and Montage Technology.

Diversification Opportunities for Loctek Ergonomic and Montage Technology

0.6

Correlation Coefficient

Loctek Ergonomic  Montage Technology

Poor diversification

The 3 months correlation between Loctek and Montage is 0.6. Overlapping area represents the amount of risk that can be diversified away by holding Loctek Ergonomic Technology and Montage Technology Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Montage Technology and Loctek Ergonomic is a relative statistical measure of the degree to which these equity instruments tend to move together. The correlation coefficient measures the extent to which returns on Loctek Ergonomic Technology are associated (or correlated) with Montage Technology. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Montage Technology has no effect on the direction of Loctek Ergonomic i.e., Loctek Ergonomic and Montage Technology go up and down completely randomly.

Pair Corralation between Loctek Ergonomic and Montage Technology

Assuming the 90 days trading horizon Loctek Ergonomic Technology is expected to under-perform the Montage Technology. But the stock apears to be less risky and, when comparing its historical volatility, Loctek Ergonomic Technology is 1.38 times less risky than Montage Technology. The stock trades about -0.16 of its potential returns per unit of risk. The Montage Technology Co is currently generating about 0.2 of returns per unit of risk over similar time horizon. If you would invest  6,652  in Montage Technology Co on September 29, 2024 and sell it today you would earn a total of  896.00  from holding Montage Technology Co or generate 13.47% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	100.0%
Values	Daily Returns

Loctek Ergonomic Technology  vs.  Montage Technology Co

Loctek Ergonomic Tec

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Loctek Ergonomic Technology has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, Loctek Ergonomic is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Montage Technology

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Montage Technology Co are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Montage Technology sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Loctek Ergonomic and Montage Technology

The main advantage of trading using opposite Loctek Ergonomic and Montage Technology positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Loctek Ergonomic position performs unexpectedly, Montage Technology can make up some of the losses. Pair trading also minimizes risk from directional movements in the market. For example, if an entire industry or sector drops because of unexpected headlines, the short position in Montage Technology will offset losses from the drop in Montage Technology's long position.

The idea behind Loctek Ergonomic Technology and Montage Technology Co pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.

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Note that this page's information should be used as a complementary analysis to find the right mix of equity instruments to add to your existing portfolios or create a brand new portfolio. You can also try the Idea Analyzer module to analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas.